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Power planning

June 20, 2017


THERE are growing indications that the government’s plan to expand power capacity is turning messy. From the very beginning, the planned addition of massive new generation capacity has been marred by the lack of foresight. This was evident in how plans for the plants envisaged for the Gadani power park had to be shelved due to unforeseen costs in their execution and how the imported coal power plants had to be switched to LNG because of unanticipated coal transport expenses. It was also apparent in how the two imported coal plants in Karachi had to be switched to domestic coal due to the burden on foreign exchange reserves. This lack of foresight was apparent in the Nandipur fiasco as well, shortly after the plant’s commissioning. In almost all cases, the key ingredients of the messy mid-course corrections were haste and an undue emphasis on new power plants, with little thought given to fuel supply or financial- and transmission-related considerations.

Now it is being reported that concerns are growing about the huge capacity payments that will come with the new generation plants. We are hearing of a looming surplus in generation capacity as well as fuel supply complications that continue to bedevil three of the latest LNG plants. It is difficult to describe these issues as teething trouble because they concern an essential part of the power-generation plan. What remains to be discovered is the impact that this additional capacity will have on the fiscal health of the state and on its foreign reserves position. Being able to afford a big increase in power-generation capacity will take more than just commissioning large numbers of power plants. The ability to afford imported fuel, to transport it over great distances where the plants are located, and to enhance power-sector finances to be able to afford the additional megawatts without committing state resources, are all key to managing a power-capacity expansion plan. Thus far, there are growing indications that the government is taking a one-eyed view of the entire affair; it is looking mainly at additional plants as the panacea and fumbling with the rest. Given the scale of the additional megawatts that are being put in place, this approach could turn disastrous like the earlier IPP-led expansion of the late 1990s did. Once again, greater transparency is required to allay these concerns.

Published in Dawn, June 20th, 2017